The surprisingly large drop in CPI inflation in September increases the chances that the Bank of England will speed up the pace of interest rate cuts by reducing rates by 25 basis points (bps) at both the November and December policy meetings. But a lot of the unexpected weakness in September was due to a very sharp fall in airfares, which the Bank is unlikely to consider a sign that domestic inflation is becoming less persistent. For now, then, we continue to think the Bank will cut rates in November but not in December.
We will be discussing what to expect in the Budget in a 20-minute online briefing at 3pm BST on Wednesday 16th October. (Register here.)
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